Data centers have become one of the most sought-after infrastructure asset classes globally, including for sovereign INVESTORS
SWFs manage trillions of dollars in assets and have become increasingly active as direct investors in infrastructure. While they historically prioritized public equities and passive strategies, many SWFs now pursue long-term, control-oriented investments in sectors aligned with national economic goals, such as the energy transition, transportation, and digital infrastructure. This is especially prevalent among SWFs aiming to diversify their economies away from hydrocarbons while exercising a mix of soft power and strategic geopolitical positioning.
Key drivers of data center investments include the following:
Data localization and sovereignty frameworks are encouraging providers to deploy capacity locally.
AI adoption is driving demand for high-density compute environments that simply did not exist a few years ago.
Government support and investor-friendly policies, including free-zone incentives and streamlined licensing pathways, have significantly reduced barriers to entry.
Region-specific ability to meet power demands associated with hyperscale data centers and semiconductor manufacturing.
Importantly, SWFs are not a monolith. Some operate with significant independence from their home governments and pursue purely commercial objectives, while others maintain closer ties to state policy and strategic priorities. This distinction can materially affect regulatory outcomes, particularly in jurisdictions that assess foreign investment risk based on both the investor’s governance and the strategic importance of the target asset. In the data center context, SWFs increasingly invest through joint ventures, platform acquisitions, and minority stakes with governance rights. These structures, while commercially attractive, may nonetheless trigger foreign investment review regimes designed to assess both control and influence over sensitive infrastructure.
LEGAL CHARACTERIZATION OF DATA CENTERS
A threshold legal issue in many jurisdictions is how data centers are categorized for regulatory purposes. Depending on the applicable framework, data centers may be treated as the following:
Real estate assets.
Telecommunications or digital infrastructure.
Critical infrastructure supporting national security or public services.
This characterization carries significant legal consequences. Real estate transactions may be subject to limited review, while investments in critical infrastructure or data-intensive businesses may trigger mandatory filings, extended review timelines, and mitigation obligations.
A major regulatory consideration for data center projects continues to be resource consumption and supply, including power and water usage, which increases the reporting obligations for operators. For example, under the mandatory reporting regime outlined in the EU Energy Efficiency Directive, data centers with power demand exceeding 500 kW must report detailed energy performance data. As we recently discussed, California—a regulatory bellwether in the United States—enacted Senate Bill 57 (SB 57) (formally known as the Ratepayer and Technological Innovation Protection Act), which directs the California Public Utilities Commission (CPUC) to study and identify opportunities to prevent or mitigate the impacts of data center electricity demand on utility ratepayers. Data center developers and operators should view these developments as an early signal of increased scrutiny.
FOREIGN INVESTMENT REVIEW AND NATIONAL SECURITY CONTROLS
The United States
In the United States, the Committee on Foreign Investment in the United States (CFIUS) plays a central role in reviewing foreign investments that may pose national security risks. CFIUS has broad jurisdiction over transactions involving the following:
Critical infrastructure.
Businesses that collect or maintain sensitive personal data of US persons.
Certain real estate transactions near sensitive government or military sites.
Data centers may fall within CFIUS’s remit on multiple grounds, particularly where they host sensitive personal data or support government or defense customers. SWF investments can attract heightened scrutiny, especially where the fund is owned or controlled by a foreign government. However, it is worth noting that the US administration’s
